The US economy continues to show improvement – for example, today’s news that new jobless claims were near a four-year low. As the economy outlook has improved, so, too, have prospects for the US tech market. In our updated Forrester forecast for US tech purchases, "US Tech Market Outlook For 2012 To 2013: Improving Economic Prospects Create Upside Potential," we now project growth of 7.5% in 2012 and 8.3% in 2013 for business and government purchases of information technology goods and services (without telecom services). Including telecom services, business and government spending on information and communications technology (ICT) will increase by 7.1% in 2012 and 7.4% in 2013.

The lead tech growth category will shift from computer equipment in 2011 to software in 2012 and 2013, with and IT consulting and systems integration services playing a strong supporting role. Following strong growth of 9.6% in 2011, computer equipment purchases will slow to 4.5% in 2012, as the lingering effects of Thailand's 2011 floods hurt parts supply in the first half and the prospect of Windows 8 dampens Wintel PC sales until the fall. Apple Macs and iPad tablets will post strong growth in the corporate market, though, and server and storage should grow in the mid-single digits.

Picking through economic news this week (French and German growth numbers; financial market turmoil; scattered US indicators) and the vendor announcements from Dell, HP, Lenovo, NetApp, and Salesforce.com, four trends emerge:

European economies are headed for a recession, and European tech market is already in decline. Eurostat (The European Union statistical agency) announced on Tuesday, August 16, that real GDP in the 17 euro area countries and the 27 European countries both grew by just 0.2% in the second quarter of 2011 from the first quarter. Annualizing these growth rates to make them comparable with US GDP growth rates, the numbers were 0.8%. France's real GDP showed no growth, while Germany's real growth was o.4% on an annualized basis. These were sharp slowdowns from France's growth of 3.6% in Q1 and Germany's growth of 5.3%. With worries growing about a financial crisis hitting European banks as a result of potential losses on their holdings of Greek, Portuguese, Irish, Italian, and Spanish bonds, ongoing government austerity programs in these countries as well as the UK, and feeble EU efforts to deal with the problems, there is a high probability that Europe will slip into recession in Q3 and Q4 2011.

Hewlett-Packard reported its financial results for the quarter ending on April 30, 2011, early in the day on May 17, a day sooner than expected. Dell reported its financial results the same day, at its normal time at the end of the day. In many ways, as we will see in a minute, the results were similar. Yet the financial market reaction was dramatically different. HP's stock price dropped by 7% during the day, while Dell's stock price rose by almost 7% in after-hours trading. Bloomberg News, in its article on the two companies' results, headlined what it saw as the reason for the different performance: "Dell Shares Rise After Corporate Spending Gives Company Edge Over Rival HP."

I am not a stock analyst, nor is Forrester in the business of analyzing or forecasting stock performance. But the divergent responses of the stock market to the financial results of HP versus Dell do have implications for vendor strategy, while the underlying results show where the tech market is headed.

First, let's compare the actual numbers. HP's revenues in the quarter were up by 3%, and right in line with expectations, while Dell's revenues were just 1% higher, and lower than expectations. Dell's sales to business rose by 3%, while HP's sales increased by 8%. Dell's sales to consumers fell by 7%, slightly better than the 8% drop in HP's sales to consumers. So far, very similar numbers between the two vendors, with HP actually doing better than Dell in the quarter. So, why the market perception that Dell outperformed HP?

One evening in 1972 I was hanging out in the computer science department at UC Berkeley with a couple of equally socially backward friends waiting for our batch programs to run, and to kill some time we dropped in on a nearby physics lab that was analyzing photographs of particle tracks from one of the various accelerators that littered the Lawrence Radiation Laboratory. Analyzing these tracks was real scut work – the overworked grad student had to measure angles between tracks, length of tracks, and apply a number of calculations to them to determine if they were of interest. To our surprise, this lab had something we had never seen before – a computer-assisted screening device that scanned the photos and in a matter of seconds determined it had any formations that were of interest. It had a big light table, a fancy scanner, whirring arms and levers and gears, and off in the corner, the computer, “a PDP from Digital Equipment.” It was a 19” rack mount box with an impressive array of lights and switches on the front. As a programmer of the immense 1 MFLOP CDC 6400 in the Rad Lab computer center, I was properly dismissive…

This was a snapshot of the dawn of the personal computer era, almost a decade before IBM Introduced the PC and blew it wide open. The PDP (Programmable Data Processor) systems from MIT Professor Ken Olsen were the beginning of the fundamental change in the relationship between man and computer, putting a person in the computing loop instead of keeping them standing outside the temple.

Like many business executives and consumers, I have been paying a lot of attention to the economic indicators, looking for signs either of a stronger economic recovery or a potential renewed recession. As a technology market analyst, I track economic indicators because I’ve found that the growth in the economy is one of the best predictors of what the technology market growth will be -- far better than surveying CIOs to find out their spending plans, which tend to be backward looking.

Based on my reading of the economic indicators and the forecasts of professional economists, it looks to me that both the US economy and the global economy will fall between extremes of strong growth or recession, growing weakly but not slipping back into recession. As a result, in Forrester's latest forecast (US And Global IT Market Outlook: Q3 2010), we have trimmed our forecasts for the US tech market to a still-robust 8.1% growth for 2010 (down from our 9.9% forecast in July), with 7.4% growth in 2011. Globally, the tech market measured in US dollars will grow by 7%, compared with our July forecast of 7.8%, with the somewhat weaker outlook for the US tech market offsetting slightly better performance in Europe and strong growth in Latin America, the Middle East, Africa, and Asia/Pacific.

These forecasts include business and government purchases of computer equipment, communications equipment, software, IT consulting and systems integration services, and IT outsourcing. If we add telecommunications services (as we do for the first time in this report), US information and communications technology (ICT) market growth in 2010 will be 5.6% and 6.6% in 2011.

Product strategists struggle with the issue of value all the time: What constitutes a revenue-maximizing price for my product, given the audience I’m targeting, the competition I’m trying to beat, the channel for purchase, and the product’s overall value proposition?

There are tools like conjoint analysis that can help product strategists test price directly via consumer research. However, there’s a bigger strategic question in the background: How can companies create and sustain consistently higher prices than their key competitors over the long term?

The Mac represents a good case study for this business problem. Macs have long earned a premium over comparable Windows PCs. Though prices for Macs have come down over time, they remain relatively more expensive, on average, than Windows-based PCs. In fact, they’ve successfully cornered the market on higher-end PCs: According to companies that track the supply side, perhaps 90% of PCs that sold for over $1,000 in Q4, 2009 were Macs.

Macs share common characteristics with Windows PCs on the hardware front – ever since Apple switched to Intel processors about four years ago, they’ve had comparable physical elements. But the relative pricing for Macs has remained advantageous to Apple. At the same time, the Mac has gained market share and is bringing new consumers into the Mac family – for example, about half of consumers who bought their Mac in an Apple Store in Q1, 2010 were new to the Mac platform. So Apple is doing something right here – providing value to consumers to make them willing to pay more.